contracts are short term. In the current institutional structure, any given agency cannot commit to a long-term relation with a vendor. Doing so would require an accord and coordinated procurement across agencies and a different procurement model.

Finally, it is important to emphasize that government policy can, by itself, substantially limit the degree of competition available for future procurement. For example, if the U.S. government contracts with only one company, it virtually guarantees that there will be a monopoly (or at least a dominant firm) in the U.S. supercomputer market. In addition, by enacting trade barriers (see Box 8.1), the government may benefit a small number of domestic firms at the expense of government agencies and other consumers of supercomputers in the future, who may have to bear much higher prices or make do with inferior equipment.

COMPETING GOVERNMENT OBJECTIVES

Overall, optimal government policy toward supercomputing must therefore balance competing objectives, including serving the requirements of mission-oriented agencies and encouraging technological progress more broadly. As a practical matter, these objectives are balanced through the procurement process, which is discussed in detail in Chapter 9. In managing the procurement process, the government faces three key trade-offs: coordination versus diversification, commitment versus flexibility, and secrecy versus spillovers.

Coordination Versus Diversification

Government agencies can coordinate or they can act independently, obtaining diverse individual solutions. By coordinating (e.g., buying the same equipment and using common software), the agencies benefit from economies of scale. However, individual agencies would not necessarily obtain the best solution for their individual needs. A central planner (supercomputer czar) would be more likely to obtain the benefits of coordination at the expense of not fully satisfying the diverse needs of individual agencies. On the other hand, if each individual agency makes independent decisions, it probably will forgo the benefits from coordination (local versus global maximization).

Commitment Versus Flexibility

The government may commit or maintain flexibility. For example, the government may commit to a particular vendor (a particular piece of hardware or software) or a particular approach (parallel versus vector ma-



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